‘Don’t try and do everything’ were the words of Sacha Sadan, Director of ESG at the Financial Conduct Authority, at the start of the recent CGIUKI ESG Summit, and they resonated throughout the day. But how do you whittle down the plethora of ESG issues into the few you really need to focus on? That’s where a materiality exercise comes in.
Best practice, as per the Global Reporting Initiative (GRI) standards, is for prioritisation to use stakeholder inclusiveness and the materiality principles of a) significance of the organisation’s economic, environmental, and social impacts; and b) their substantive influence on the assessments and decisions of stakeholders.
What this means in practice is more fluid. Assessing the significance of the organisation’s economic, environmental, and social impacts is relatively straightforward and can be achieved through an ESG risk and opportunity review. Assessing stakeholder views, however, follows no strict format. The biggest companies tend to conduct extensive stakeholder surveys or interviews to quantitatively and qualitatively assess the relative importance of different ESG issues. But for companies at the beginning of their ESG journey, this extensive and timely process is not always practical. Don’t be put off. There are a number of other ways to gather stakeholder viewpoints sufficient to generate a good assessment of material issues:
These can all be gathered through a desktop review, but don’t underestimate the power of interviews. Interviewing people in the business, particularly those with stakeholder facing roles, can be an easy way to get a substantive amount of this information, particularly the first two of the points above.
The next step is to prioritise the stakeholder viewpoints. Consider which stakeholder groups are the most important to your business and where there are commonalities in viewpoint. Remember, this is an art, not a science. Combine these with your ESG risk and opportunity review findings to isolate your company’s material issues. Using a materiality graph can help (see some examples here and here), but it’s not strictly necessary - a list of priorities and the rationale behind them is fine too.
For support with conducting your ESG materiality review and/or developing a strategy, contact Rawstone Consulting - a boutique consultancy of previously in-house sustainability leaders who take a practical approach to ESG delivery. www.rawstoneconsulting.co.uk.
We will be discussing ‘ESG: what does it mean in the boardroom?’ at Governance 2022.